The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) held that the allegation of Principal Commissioner of Income Tax (PCIT) that the assessee has under stated the revenue shown in Profit and Loss (P&L) account is due to tax being deducted on Value Added Tax (VAT) amount, thus quashed the revisionary order under Section 263 of Income Tax Act, 1961.
The assessee Masani Engineering Company Pvt. Ltd filed its return of income for the year under consideration declaring total income of Rs. 13,65,900/-. Subsequently the case was selected for scrutiny under CASS (Computer Aided Scrutiny Selection) for the reason of High Ratio of refund to TDS (Tax deducted at source), Low net profit shown by construction contractors and claim of large refund. Notices under Section 143(2) and 142(1) of the Income Tax were served upon assessee.
In response, assessee furnished various details and submissions to the Assessing Officer (AO). Accordingly, assessment under Section 143(3) of the Income Tax Act finalized on return income of Rs. 13,65,900/- was made by the AO. Thereafter PCIT called for case records and examined the records. In his examination, he found that there is mismatch in total receipts as per 26AS i.e. Rs. 23, 38, 48,997/- in regards to receipts shown in Profit and Loss (Pand L) account. i.e. Rs. 23,15,66,859/-. This resulted into a difference in receipts of Rs.22,82,138/-. On this ground PCIT issued notice under Section 263 of Income Tax Act.
According to the annexure reproduced by the assessee in this case the relevant issue has already been enquired by the AO.
The Bench comprising of Vikas Awasthy, Judicial Member and Gagan Goyal, Accountant Member observed that issues relating to revenue of the assessee for the relevant financial year were duly examined with reference to the books of accounts and response of the assessee during assessment proceedings.
It was further observed that the allegation of the PCIT that revenue has been under stated is found to be baseless as the difference in the figure of TDS claimed with regards to amount of receipts declared in the Profit and Loss (P&L) account is arisen because sometime TDS is deducted on VAT amount also, credit notes not reversed by the customer, but TDS amount is still there, TDS deducted applying extra rate and TDS deducted on advance received which assessee disclosed in next year etc.
Resultantly, the order of AO is found to be correct and not an erroneous order in so far as prejudicial to the interest of revenue for the purposes of Section 263 of the Income Tax Act. In result, grounds raised by the assessee were allowed and order of PCIT was set aside.
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